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ICICI Securities Report
Stable yields and assets under management growth have incrementally put gold loan business on a much better footing. This will potentially further receive support from higher gold prices and some concerns in the unsecured loan segment. Non-gold businesses have also performed well for Gold non-banking financial company's led by micro finance institutions which essentially opens up structural growth opportunities beyond gold for these players.
We recommend 'Buy' (unchanged) on Manappuram Finance Ltd. with a revised target price of Rs 190 (prior: Rs 172), and 'Add' (downgrade from Buy) on Muthoot Finance Ltd. with a revised target price of Rs 1,605 (prior: Rs 1,279).
We see the possible resurfacing of competitive intensity, pressuring growth or net interest margin, as a key risk. In this report, we also lay out the detailed commentaries from lenders on gold loans, and the historical correlation between gold AUM and price for Muthoot Finance/Manappuram Finance.
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